Even as the Sensex struggles to stay above the 17,500 mark, fifty stocks hit their 52-week lows on Wednesday. Meanwhile, the fact that Korea and Taiwan have not been upgraded to the status of developed markets (DMs) by MSCI and will retain their emerging market status, means that India will continue to compete with them for fund allocations within the Emerging Markets category.
Had these two markets been elevated India might have been a beneficiary in terms of higher weightage and consequently allocation of funds. India, of course remains an emerging market amongst the 77 markets covered by MSCI (Morgan Stanley Capital International), a provider of a range of products, services and indices.
In a positive for the Indian market, MSCI has upgraded it for improved infrastructure relating to the stock lending mechanism, with the rating going up from + to ++. This follows the increase in the period of the lending contracts from one week to 52 weeks, as implemented by the Securities and Exchange Board of India (Sebi), some time back.
Among the companies whose share prices hit 52-week lows on Wednesday was Maruti Suzuki, which saw a prolonged strike at its plant recently and the government-owned SAIL, which turned in poor results in the three months to March 2011 and shares of which the government is hoping to sell through a follow-on issue.
That apart, the list includes a bunch of mid-cap and small-cap counters including construction firm Gammon, telecom company Tata Communications and brokerage Motilal Oswal. While the BSE 200 has lost 14% since the start of the year, the BSE Mid Cap index has yielded 16.33% and the BSE small cap index has come off by as much as 19.2%. In the same time, the Sensex has given up 14.42%.
Sandip Sabharwal, CEO, PMS, Prabhudas Lilladher says, ?There is a fair amount of apathy towards equities because small investors in particular have not made too much money and are now selling out.? However Sabharwal believes that despite all the macroeconomic headwinds, the correction in the prices of commodities could restrict further downside.
Moreover, valuations of most mid-cap companies that are not institutional favourites are at levels similar to those seen in 2004. ?For the broader market, excluding the large caps, the vast majority of mid-caps are trading at a price earnings multiple of just 8- 10 times one year forward earnings,? he observes.
Foreign fund managers remain underweight on India as macroeconomic headwinds threaten to slow down growth to sub-8% levels in 2011-12.
Foreign institutional investors have now pulled out close to $640 million from the Indian market since January 2011; in the same period last year they had shopped for stocks worth $5.5 billion.
After three strong quarters of growth, the Sensex set of companies witnessed a slowdown in profit growth in the three months to March 2011 at -2% though the numbers were skewed by the sharp fall in profits at the State Bank of India (SBI), which resorted to significantly higher provisioning and a lower than anticipated profit for ONGC because of a higher subsidy burden.